SOLDIER’S PAY

Grey River Argus, 26 November 1942, Page 8

SOLDIER’S PAY

MADE UP BY FIRM TAX APPEAL SUCCEEDS WELLINGTON, Nov. 24. Unanimous opinions allowing a soldier’s appeal against an assessment of income tax on money paid to him by a firm to make up his Army pay to his civilian sfatus were given in judgments of the Court of Appeal. The appellant was Neil Melville Louisson, company director of Auckland, and the respondent the Commissioner of Taxes. The joint judgment of the Chief Justice‘(Sir Michael Myers) and Mr Justice Northcroft stated that it was necessary to consider section 4 of the Land and Income Tax of 1939 and the Occupational Re-establishment Emergency Regulations, 1940, in conjunction. Apart from the regulations and the section of the Act in question, the appellant’s employment with the company (Fairbairn, Wright, Ltd., of which he was a director and a salaried officer) was terminated, not merely suspended, by his enlistment on October 1, 1939. After quoting the relevant portion of the regulations, the judgment, continued: “It seems to us, therefore, that the regulations contemplate and permit, ‘arrangements’ being made between employer and employee whereby remuneration may be paid to the employee during his period of military service, but may have not the effect of continuing the employment in any way during the period of military service in the absence of such an ‘arrangement.’ For example, seeing that, as we have already, said, there is no obligation or duty on the ' part of the employee to return to his employment after the termination of his military service, an ‘arrangement’ might be made between the employer and the employee whereby, in consideration of the employee agreeing to return to his employment after the termination of his military service, ceriain payments would be made to him by the employer by way of remuneration during his period of military service, and it seems to us that payments of that nature might properly be classed as ‘sums paid by way of wages, salary, or allowance’ (particularly allowance), to which section 4 of the Act of 1939 might apply.” However, in order that the regu- i lations and the section could on that ■ interpretation apply to the present case, it must appear that there- was , an arrangement in the nature of an - agreement to which the employee was . a party, and in the present case it , was not stated, nor was there any ( evidence, that there was such an ar- < rangement. All that could be said ( on the case stated was that the com- ~ {•any entirely on its own volition, j decided to make gratuitous payments j to members of the company’s staff ( enlisting or being called up for ser- j vice wit’, the N.Z.E.F. or for Terri- x torial training. In their Honours t opinion, such payments were per- , sonal gifts and plainly did not. come within section 79 of the Land and .

Income Tax Act, 1923. as being “salary, wages or allowances, etc.” Their Honours stated: “It seems to us that in all the cases where gratuities - have been held to be assessable as income, there' has always been ser- t vice or employment or something in t the nature of service or employment P as between the recipient and the n donor. We cannot see that can be t said to be the case as between a I . member oi' the Armed Forces and an £ ordinary citizen, Vwen t'hough the z toldier may previous to his becom- e ing a member of the Armed Forces r have been in that citizen’s employ- r ment.” 1 The judgment added that it might £ be probable that, as was contended s for the Commissioner, the authors of t the Act of 1939 and the regulations i intended to allow a deduction to em- f ployers in respect of all or any j moneys paid to a “serving employee” j to the extent mentioned in section 4 of the Act, and possible that they intended to make the moneys so paid taxable, in the hands of the recipient. “If that is what they meant,” the judgment commented, “they should have said so in plain terms. The Court can give effect only to the words C used and not to speculation as to some intention which the draftsman I has failed to express. If the Court’s .interpretation is different from the c intention of the authors, the remedy s of amendment is always open.” c Mr Justice Blair delivered his own e judgment allowing the appeal, and s read that of Mr Justice Kennedy to c the same effect. q p